Brutal weather and a lack of listings stifled home sales in the Twin Cities last month, but declines in foreclosure transactions helped lift prices.
There were 2,465 closings in February, a 14 percent decline from last year, according to a report Wednesday from the Minneapolis Area Association of Realtors. The median price of those sales was $183,044, a 14.4 percent increase and the 24th consecutive month of price gains.
“The weather has certainly played a factor,” said Ryan O’Neill, an agent with Re/Max Advantage Plus. “The market needed to take a collective deep breath. The polar vortex and this brutal winter gave everyone that perfect opportunity.”
Since November, year-over-year declines in sales in the Twin Cities and much of the nation have raised concerns that the housing recovery is stalling, but agents attribute the declines to less-than-ideal buying conditions and a dearth of options for buyers.
From difficult travel conditions to heaps of snow that make showing a property in its best light nearly impossible, agents say the weather has put a dent in traffic. That’s why Marcy Wengler, a sales agent with Edina Realty, tempted buyers with cookies and coffee at a recent open house. “This year has been interesting,” she said. “Buyers are having trouble getting out and about.”
While home sales generally wane over the holidays and during the winter, traffic has been below expectations. Some agents argue that it’s just a modest correction following an unusually strong recovery. Others attribute the slowdown to a lack of options for qualified buyers. Indeed, the number of homes on the market is nearly 10 percent behind last year’s pace and the lowest in a decade. At the current sales pace, that inventory would last only 2.8 months, a near-record low.
During February, only 4,616 new listings were put on the market, a 5 percent decline compared with last year.
“Supply simply isn’t meeting the demand. In other words, there just isn’t enough inventory to go around right now,” said Greg Mason, president at Edina Realty Home Services.
And there’s another factor at play. With home prices on the rise and the economy on the mend, there’s been a dramatic decline in foreclosures and short sales over the past year, reducing the supply of heavily discounted properties that helped drive the recovery. During the most heady days of the recovery, investors armed with cash accounted for 30 to 40 percent of all buyers.
As those deals evaporate, traditional and move-up buyers will gradually replace those investors and bargain hunters. Last month, distressed sales represented only 30.3 percent of all sales, compared with 43.9 percent last year.
“While the market shifts back toward where it was before the bubble, we expect to see foreclosures and short sales become less prevalent, which can dilute overall numbers,” said Emily Green, president of the Minneapolis Area Association of Realtors.
All eyes are on March sales — and the weather. With temperatures on the rise, Mason said early-March sales at Edina Realty have been almost equal to last March following significant declines in January and February.
“We’ll see the market change day by day as the snow melts and conditions improve,” Mason said. “I think momentum is growing and activity will increase significantly in the coming weeks.”